Telus Corp, Canada's second-largest wireless company by subscribers, ended its plan to buy struggling startup Mobilicity after the government blocked the deal in an effort to boost competition in the sector.

Last week, Canada rejected the transfer of Mobilicity's wireless spectrum licenses to Telus (Burnaby, Canada), effectively blocking its takeover of the startup as the government tries to hold back the industry's bigger companies from swallowing smaller rivals.

Debt-laden Mobilicity (Vaughan, Canada) and other entrants such as Wind Mobile (Toronto, Canada), which have struggled to turn a profit, bought airwaves in 2008 that Telus and its main rivals were barred from bidding for. Mobilicity has around 250,000 customers, but is mostly coveted for its spectrum assets.

Anthony Lacavera, the entrepreneur behind Wind Mobile, said on Tuesday that his group was interested in buying Mobilicity, while another entrant, Public Mobile (Toronto, Canada), has also pressed for consolidation among startups.

Mobilicity said late on Monday that it would now pursue its previously announced recapitalization plan, which will be voted on by debtholders at a meeting on June 25, 2013.

(Reporting by Ankur Banerjee and Garima Goel in Bangalore. Editing by Andre Grenon)